Forint Gains Third Day as Yields Near 3-Year Low: Budapest Mover

March 27 (Bloomberg) -- The forint gained for a third day
and bond yields traded within two basis point of a three-year
low as Hungary’s central bank urged caution after cutting rates
to a record yesterday.

The currency had the longest streak of advances in more
than a month after central bank president Gyorgy Matolcsy
allayed concern he would loosen monetary policy faster or via
unconventional methods. The Magyar Nemzeti Bank said market
volatility warrants a “cautious” approach even though the
outlook for both inflation and the economy points to a further
easing in monetary conditions.

“The Monetary Council’s more cautious tone caused the
forint to strengthen as investors’ concern on extraordinary
policy loosening abated,” Levente Blaho and Adam Keszeg,
Budapest-based analysts at Raiffeisen Bank International AG,
wrote in an e-mailed report today. “That may still be driving
the forint stronger today.”

The forint gained 0.1 percent to 304.10 per euro by 4:14
p.m. in Budapest. It is heading for a 4.2 percent decline this
quarter, the worst performance since the end of 2011. Yields on
the government’s benchmark three-year bonds rose two basis
points, or 0.02 percentage point, to 5.20 percent after a 16
basis-point plunge to the lowest since April 2010 yesterday.

The central bank trimmed its two-week deposit rate by 25
basis points to 5 percent yesterday, maintaining the pace of
easing from the previous seven months. That was the first rates
decision since Prime Minister Viktor Orban appointed former
economy minister Matolcsy as the bank’s president.

The bank would only cut rates further if inflationary
pressures stay moderate and if the market environment
stabilizes, it said in a statement published on its website
after the decision.